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Home My WebLink AboutO 107xHvzE Image Project Order File Cover Page This page identifies those items that were not scanned during the initial production scanning phase. They are available in the original file, may be scanned during a special rescan activity or are viewable by direct inspection of the file. O Order File Identifier Organizing (done) RESCAN ❑ Color Items: ❑ Greyscale Items: ❑ Poor Quality Originals: ❑ Other: NOTES: ❑ Two-sided 1111111111111111111 DIGITAL DATA ❑ Diskettes, No. ❑ Other, No/Type: o a„UnN,ed,a iuuiuuuiuiu OVERSIZED (Scannable) ❑ Maps: ❑ Other Items Scannable by a Large Scanner OVERSIZED (Non -Scannable) ❑ Logs of various kinds: ❑ Other: BY: Angela ✓ Date: 16- 2-6 - 20 l5 /s/ W- Project Proofing III IIIIIIIIIII IIIII BY: Angela ✓ Date: 'W- 21�6 - 2 o k rz� /s/ W, Scanning Preparation x 30 = + = TOTAL PAGES Z:%' BY: Angela ✓ Date: (Count does not include cover sheet) - 2C6 - 2 S /s/ Qk-- Production Scanning III IIIIIIIIIII IIIII Stage 1 Page Count from Scanned File: 2::C (Count does include cover sheet) Page Count Matches Number in Scanning Preparation: ✓ YES NO BY: Angela ✓ Date: `6 - 2 �" 2-" S /s/ r"� Stage 1 If NO in stage 1, page(s) discrepancies were found: YES NO BY: Angela Date: /s/ Scanning is complete at this point unless rescanning is required. II I II II (IIIII) IIIII ReScanned III IIIIIIIIIII IIIII BY: Angela Date: /s/ Comments about this file: Quality Checked III IIIII III II II III 2/27/2015 Orders File Cover Page INDEX OTHER ORDER NO. 107 Great Bear Petroleum, Alkaid #1 Docket No. OTH-15-016 1. April 15, 2015 Email requesting information re: Alkaid # 1 (Confidential attachments held in secure storage) 2. April 22, 2015 NOV to Great Bear re: inadequate LOT on surface casing shoe 3. May 7, 2015 Response from Great Bear re: NOV (Confidential attachments held in secure storage) 4. August 28, 2015 Letter and civil penalty payment of $20,000 from Great Bear INDEX OTHER ORDER NO. 107 STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage, Alaska 99501 Re: Inadequate LOT on surface casing shoe Other Order No. 107 Alkaid #1 Docket No. OTH-15-016 Permit No. 214-208 July 29, 2015 DECISION AND ORDER On April 22, 2015 the Alaska Oil and Gas Conservation Commission (AOGCC) issued a Notice of Violation (NOV) to Great Bear Petroleum Operating, LLC (Great Bear) regarding the Alkaid #1 exploration well (Alkaid #1). The Notice was based upon Great Bear's failure to properly conduct and analyze a surface casing formation integrity test as required by 20 AAC 25.030(f)'. After review of the evidence submitted in response to the NOV AOGCC will impose the civil penalties set forth below. Summary of Proposed Enforcement Action The Notice cited a violation of 20 AAC 25.030(f) which required Great Bear to conduct a leak - off test (LOT) on Alkaid #1 by following an approved procedure in the Permit to Drill (PTD) application. The LOT procedure was not followed by Great Bear on March 9, 2015 after drilling out of the surface casing shoe. Furthermore, Great Bear's incorrect evaluation of the test data resulted in a higher LOT value than warranted by a correct interpretation of the data. For failing to follow the LOT procedures and proceeding to drill ahead without obtaining proper authorization from AOGCC, corrective actions and a civil penalty in the amount of $20,000 are imposed. 1 A formation integrity test must be performed if blowout prevention equipment is installed on casing. The test must be performed to a predetermined equivalent mud weight, leak -off, or fracture pressure as specified in the application for the Permit to Drill. The test results must demonstrate that the integrity of the casing shoe is sufficient to contain the anticipated wellbore pressures while drilling to the next casing point or total depth as appropriate. The Alkaid #1 Permit to Drill approved a leak -off test (LOT) as proposed by Great Bear to be conducted after drilling not more than 50 feet of new formation below the surface casing shoe. Other Order No. 107 July 29, 2015 Page 2 of 5 Changes to an Approved PTD On January 21, 2015, Great Bear was issued PTD 214-208 for Alkaid #1. The approved LOT procedure included an expected equivalent mud weight of 13 pounds per gallon (ppg), a weight deemed necessary to drill safely to the next casing setting depth. AOGCC's subsequent review of an application for sundry approval to allow for annular disposal in Alkaid 41 determined that the LOT value specified in the PTD was not achieved .2 Drilling operations on Alkaid #1 continued without Great Bear obtaining approval for changes to the PTD. Two regulations were violated by Great Bear's actions: 1) 20 AAC 25.015(b)(2) which requires the operator to submit and obtain AOGCC approval of an Application for Sundry Approvals (Form 10-403) if there is a needed change to an approved PTD; 2) 20 AAC 25.030(g) which allows for a variance to the LOT procedure upon request of the operator if the well casing and cementing program requirements are satisfied. There is no dispute that Great Bear failed to notify AOGCC of the change to its well plan. Kick Tolerance and LOT Relationship to Well Integrity Well design requires establishing the anticipated well pressures, including the potential for a wellbore influx (kick) and the integrity of the formation (fracture pressure). The casing shoe must be able to hold the predicted mud weight used for drilling the upcoming section and withstand the intensity of an unexpected influx. Kick tolerance is a safety requirement to account for the pressure increase in a well that can occur from an unexpected influx of gas or formation fluids. Kick tolerance also accounts for the maximum pressure at the casing shoe when a kick is circulated out of the well. The kick tolerance determination is influenced by the length of open hole below the last casing shoe, the intensity of the kick and the predicted mud weight used to drill to the next casing setting depth (or total depth). The LOT result provides the 2 Submitted with the sundry application were the original LOT data as well as Daily Drilling and Weekly Activity Reports for Alkaid #1. Surface casing shoe LOT data fail to substantiate the equivalent mud weight value stated in the reports. AOGCC review of the test data revealed an even lower LOT value than reported (11 ppg versus the 12 ppg reported by Great Bear; expected LOT value used for the well design in the approved in PTD was 13 ppg). s Kick intensity is how underbalanced (in pounds per gallon) the current mud weight used in drilling the well is in relationship to a penetrated higher pressure zone (converted to an equivalent mud weight). Other Order No. 107 July 29, 2015 Page 3 of 5 maximum mud weight inclusive of the kick tolerance. An accurate understanding of the well's ability to contain pressure is critical to maintaining wellbore integrity and containment of the wellbore fluids. The Alkaid #1 LOT data reveals a significant pump -in rate change midway through the test.4 That rate change affects the quality of the LOT data and contradicts the validity of the 12 ppg value reported by Great Bear. Responding to information requested in the Notice on May 7, 2015, Great Bear supplied kick tolerance calculations using a volumetric method to justify its decision to continue drilling past the surface casing shoe. Review of Great Bear's calculation spreadsheets establishes that Great Bear's kick tolerance calculation did not include a realistic kick intensity component. Normally in the relatively unknown situation of an exploration well — with limited offset data to guide the well design — a minimum 0.5 ppg kick tolerance should be included; Great Bear's kick tolerance calculation used a negative kick intensity value (i.e. always overbalanced with mud weight) which made the kick tolerance overly optimistic.5 Great Bear offers four reasons for its failure to perform a proper LOT after drilling out the surface casing shoe in Alkaid #1 and why the AOGCC was not notified of any abnormalities. First, Nabors Rig 105E crews were not trained properly in the LOT procedure and did not realize that changing pump rates would impact the data. Second, Great Bear drilling/oversight staff did not see the need to notify the AOGCC of the LOT anomalies since they believed the resulting LOT value met the minimum safety margin using a volumetric method of calculating kick tolerance. Third, Great Bear concluded that the lower LOT value (12 ppg per Great Bear) was acceptable since Great Bear ultimately shortened the well's total depth. Fourth, coal seams directly below the surface casing shoe were seen on well logs and could explain the lower than expected LOT results. None of these reasons dispute the occurrence of the violations. 4 Pump in rate was changed from 0.33 to 0.55 barrels per minute midway through the test. Pump -in rate during a LOT is to remain constant. 5 From the well data provided, AOGCC calculated a kick tolerance of 11.4 barrels compared to 33.4 barrels determined with Great Bear's questionable volumetric method which included a negative kick intensity. With a much lower kick tolerance, the risk of fracture at the surface casing shoe and underground blowout is increased. Other Order No. 107 July 29, 2015 Page 4 of 5 Conclusions Great Bear violated both the regulations and the conditions upon which its drilling permit was approved. As the operator of the Alkaid #1 well, Great Bear has sole responsibility to understand and comply fully with all AOGCC regulations. Great Bear failed to follow the approved procedure for conducting a valid LOT and continued drilling without notifying the AOGCC of anomalies in the surface casing shoe LOT. Great Bear's explanations for the violations are unpersuasive at best. The criteria of AS 31.05.150(g) were considered by AOGCC in determining the civil penalty. Great Bear does not dispute: - the findings in the Notice dated April 22, 2015; - the LOT procedure was improperly conducted; and - they failed to follow the procedure in the approved Alkaid #1 PTD. Now Therefore It Is Ordered That: Within 30 days after this Decision and Order becomes final, Great Bear must pay the AOGCC a civil penalty in the amount of $20,000. In addition, the following corrective actions are imposed: 1. Within 30 days following this decision, Great Bear must provide a plan to train its rig crews on the proper conduct of a formation integrity test (performed to a predetermined equivalent mud weight, leak -off, or fracture pressure as appropriate); 2. Prior to drilling its next well, Great Bear must modify its kick tolerance determination to eliminate the negative kick intensity component and obtain advanced approval of the means by which it will determine the kick tolerance of the well. As an Operator involved in an enforcement action, you are required to preserve documents concerning the above action until after resolution of the proceeding. Other Order No. 107 July 29, 2015 Page 5 of 5 Done at Anchorage, Alaska and dated July 29, 2015. �4 ei� Cathy . Foerster Daniel T. Seamount, Jr. Chair, Commissioner Commissioner TION AND APPEAL NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10-days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day that does not fall on a weekend or state holiday. James Gibbs Jack Hakkila P.O. Box 1597 P.O. Box 190083 Soldotna, AK 99669 Anchorage, AK 99519 Gordon Severson Penny Vadla 3201 Westmar Cir. 399 W. Riverview Ave. Anchorage, AK 99508-4336 Soldotna, AK 99669-7714 Richard Wagner Darwin Waldsmith P.O. Box 60868 P.O. Box 39309 Fairbanks, AK 99706 Ninilchik, AK 99639 Bernie Karl K&K Recycling Inc. P.O. Box 58055 Fairbanks, AK 99711 George Vaught, Jr. P.O. Box 13557 Denver, CO 80201-3557 rtiz.;�e� Angela K. Singh m Ln r- Ln Er r- io -n 0 C3 n 0 0 crt O r� Mr. PatrickS. Galvin o VP External Affairs and Apt. No., o--r PW-1 Great Bear Petroleum Operating, LLC ----------------------- 601 W. 5th Ave., Ste. 505 ■ Complete items 1, 2, and 3. ■ Print your name and address on the reverse so that we can return the card to you. ■ Attach this card to the back of the mailpiece, or on the front if space permits. 1. Article Addressed to: Mr. Patrick S. Galvin VP External Affairs Great Bear Petroleum Operating, LLC 601 W. 5th Ave., Ste. 505 Anchorage, AK 99501 A. Signature X Name) I C. ❑ Agent ❑ Addressee IAA UVV 1 -7/�/ D. Is elivery address different from item 7 IJ Yes If YES, enter delivery address below: ❑ No 3. Service Type ❑ Priority Mail Express® II I IIIIII IIII III II II I II II III II II III") II I II III ❑ Adult Signature ❑ Registered MailT ❑ Adult Signature Restricted Delivery ❑Registered Mail Restricted H'L�ertified Mail® Delivery 9590 9401 0049 5071 3199 98 0 Certified Mail Restricted Delivery ❑ Return Receipt for ❑ Collect on Delivery Merchandise 2. Article Number (Transfer from service label) ❑ Collect on Delivery Restricted Delivery El Signature Confirmation- -- wed Mail ❑ Signature Confirmation 7 01 5 0640 0006 0779 5753 ed Mail Restricted Delivery Restricted Delivery PS Form 3811, April 2015 PSN 7530-02-000-9053 Domestic Return Receipt Carlisle, Samantha J (DOA) From: Carlisle, Samantha J (DOA) Sent: Thursday, July 30, 2015 1:02 PM To: 'Ballantine, Tab A (LAW) (tab.ballantine@alaska.gov)'; 'Bender, Makana K (DOA) (makana.bender@alaska.gov)'; 'Bettis, Patricia K (DOA) (patricia.bettis@alaska.gov)'; 'Brooks, Phoebe L (DOA) (phoebe.brooks@alaska.gov)'; Carlisle, Samantha J (DOA); 'Colombie, Jody J (DOA) Oody.colombie@alaska.gov)'; 'Crisp, John H (DOA) Oohn.crisp@alaska.gov)'; 'Davies, Stephen F (DOA) (steve.davies@alaska.gov)'; Eaton, Loraine E (DOA); 'Foerster, Catherine P (DOA) (cathy.foerster@alaska.gov)'; 'Frystacky, Michal (michal.frystacky@alaska.gov)'; 'Grimaldi, Louis R (DOA) (lou.grimaldi@alaska.gov)'; 'Guhl, Meredith (DOA sponsored) (meredith.guhl@alaska.gov)'; Herrera, Matthew F (DOA); 'Hill, Johnnie W (DOA)'; 'Hunt, Jennifer L (DOA)'; Jackson, Jasper C (DOA); 'Jones, Jeffery B (DOA) Oeffjones@alaska.gov)'; Kair, Michael N (DOA); Loepp, Victoria T (DOA); 'Mumm, Joseph (DOA sponsored) Ooseph.mumm@alaska.gov)'; 'Noble, Robert C (DOA) (bob.noble@alaska.gov)'; 'Paladijczuk, Tracie L (DOA) (tracie.paladijczuk@alaska.gov)'; 'Pasqual, Maria (DOA) (maria.pasqual@alaska.gov)'; 'Regg, James B (DOA) Oim.regg@alaska.gov)'; 'Roby, David S (DOA) (dave.roby@alaska.gov)'; 'Scheve, Charles M (DOA) (chuck.scheve@alaska.gov)'; 'Schwartz, Guy L (DOA) (guy.schwartz@alaska.gov)'; 'Seamount, Dan T (DOA) (dan.seamount@alaska.gov)'; 'Singh, Angela K (DOA) (angela.singh@alaska.gov)'; 'Wallace, Chris D (DOA) (chris.wallace@alaska.gov)'; 'AKDCWellIntegrityCoordinator'; 'Alex Demarban'; 'Alexander Bridge'; 'Allen Huckabay'; 'Andrew VanderJack'; 'Anna Raff'; 'Barbara F Fullmer'; 'bbritch'; 'Becca Hulme'; 'Becky Bohrer'; 'Bob Shavelson'; 'Brian Havelock'; 'Bruce Webb'; Burdick, John D (DNR); 'Carrie Wong'; 'Cliff Posey'; 'Colleen Miller'; 'Crandall, Krissell'; 'D Lawrence'; 'Dave Harbour'; 'David Boelens'; 'David Duffy'; 'David House'; 'David McCaleb'; 'David Steingreaber'; 'David Tetta'; 'Davide Simeone'; 'ddonkel@cfl.rr.com';'Dean Gallegos'; Delbridge, Rena E (LAS); DNROG Units (DNR sponsored); 'Donna Ambruz'; 'Ed Jones'; 'Elowe, Kristin'; 'Evans, John R (LDZX)'; 'Frank Molli'; 'Gary Oskolkosf'; 'George Pollock'; 'ghammons'; 'Gordon Pospisil'; 'Greg Duggin'; 'Gregg Nady'; 'gspfoff'; 'Jacki Rose'; 'Jdarlington Qarlington@gmail.com)'; 'Jeanne McPherren'; 'Jennifer Williams'; 'Jerry Hodgden'; 'Jerry McCutcheon'; 'Jessica Solnick'; 'Jim Watt'; 'Jim White'; 'Joe Lastufka'; 'Joe Nicks'; 'John Adams'; 'John Easton'; 'Jon Goltz'; 'Juanita Lovett'; 'Judy Stanek'; 'Julie Houle'; 'Julie Little'; 'Karl Moriarty'; 'Kazeem Adegbola'; 'Keith Wiles'; 'Kelly Sperback'; 'Laura Silliphant (laura.gregersen@alaska.gov)'; 'Leslie Smith'; 'Lisa Parker'; 'Louisiana Cutler'; 'Luke Keller'; 'Marc Kovak'; 'Mark Dalton'; 'Mark Hanley (mark.hanley@anadarko.com)'; 'Mark Landt'; 'Mark Wedman'; 'Marquerite kremer (meg.kremer@alaska.gov)'; 'Mary Cocklan-Vendl'; 'Michael Calkins'; 'Michael Duncan'; 'Michael Moora'; 'Mike Bill'; 'Mike Mason'; 'Mike) Schultz'; 'MJ Loveland'; 'mkm7200'; Morones, Mark P (DNR); Munisteri, Islin W M (DNR); 'nelson'; 'Nichole Saunders'; 'Nick W. Glover'; 'Nikki Martin'; 'NSK Problem Well Supv'; 'Oliver Sternicki'; 'Patty Alfaro'; 'Paul Craig'; 'Paul Decker (paul.decker@alaska.gov)'; 'Paul Mazzolini'; Pike, Kevin W (DNR); 'Randall Kanady'; 'Randy L. Skillern'; 'Renan Yanish'; 'Robert Brelsford'; 'Ryan Tunseth'; 'Sara Leverette'; 'Scott Griffith'; 'Shannon Donnelly'; 'Sharmaine Copeland'; 'Sharon Yarawsky'; Shellenbaum, Diane P (DNR); 'Smart Energy Universe'; Smith, Kyle S (DNR); 'Sondra Stewman'; 'Stephanie Klemmer'; 'Steve Moothart (steve.moothart@alaska.gov)'; 'Suzanne Gibson'; 'Tamera Sheffield'; 'Tanis Ramos'; 'Ted Kramer'; 'Temple Davidson'; 'Terence Dalton'; 'Teresa Imm'; 'Terry Templeman'; 'Thor Cutler'; 'Tim Mayers'; 'Todd Durkee'; 'Tony Hopfinger'; 'trmjrl'; 'Tyler Senden'; 'Vicki Irwin'; 'Vinnie Catalano'; 'Walter Featherly'; 'Aaron Gluzman'; 'Aaron Sorrell'; 'Ajibola Adeyeye'; 'Alan Dennis'; 'Andrew Cater'; 'Anne Hillman'; 'Brian Gross'; 'Bruce Williams'; 1 To: Bruno, Jeff J (DNR); 'Caroline Bajsarowicz'; 'Casey Sullivan'; 'Diane Richmond'; 'Don Shaw'; 'Donna Vukich'; 'Eric Lidji'; 'Erik Opstad'; 'Gary Orr'; 'Graham Smith'; 'Greg Mattson'; 'Hak Dickenson'; Heusser, Heather A (DNR); 'Holly Pearen'; Hyun, James J (DNR); 'Jason Bergerson'; 'Jill McLeod'; 'Jim Magill'; 'Joe Longo'; 'John Martineck'; 'Josh Kindred'; 'Kenneth Luckey'; King, Kathleen J (DNR); 'Laney Vazquez'; 'Lois Epstein'; Longan, Sara W (DNR); 'Marc Kuck'; 'Marcia Hobson'; 'Marie Steele'; 'Matt Armstrong'; 'Matt Gill'; 'Mike Franger'; 'Morgan, Kirk A (DNR)'; 'Pat Galvin'; 'Pete Dickinson'; 'Peter Contreras'; 'Richard Garrard'; 'Robert Province'; 'Ryan Daniel'; 'Sandra Lemke'; 'Sarah Baker'; 'Shaun Peterson'; 'Susan Pollard'; 'Talib Syed'; 'Terence Dalton'; 'Tina Grovier (tmgrovier@stoel.com)'; Todd, Richard J (LAW); Tostevin, Breck C (LAW); 'Wayne Wooster'; 'William Hutto'; 'William Van Dyke' Subject: Other Order 107 (Alkaid #1) Attachments: other107 Please see attached. ti�l �,ka t,)ii and (sa_y ('ollservatiolI )III III issio11 tit V0111U �()r CONFIDENTIALITY NOTICE: This e-mail message, including any attachments, contains information from the Alaska Oil and Gas Conservation Commission (AOGCC), State of Alaska and is for the sole use of the intended recipient(s). It may contain confidential and/or privileged information. The unauthorized review, use or disclosure of such information may violate state or federal law. If you are an unintended recipient of this e-mail, please delete it, without first saving or forwarding it, and, so that the AOGCC is aware of the mistake in sending it to you, contact Samantha Carlisle at (907) 793-1223 or Samantha.Carlisle@alaska.gov. 2 RECEIVED AUG 2 8 2015 Great Bear Petroleum A New Direction for the Last Frontier August 28, 2015 Ms. Cathy Foerster, Chair Alaska Oil and Gas Conservation Commission 333 W. 7th Ave. Anchorage, Alaska 99501 RE: Docket No. OTH-15-016 Well: Alkaid #1 (PTD 214-208) Chair Foerster, Great Bear Petroleum Operating LLC ("Great Bear") accepts the AOGCC determination in the above referenced matter. Enclosed is a check for $20,000 as payment of the civil fine imposed. Also enclosed is the required Formation Integrity Test Training Plan. Great Bear maintains that the Alkaid #1 well was drilled with all proper considerations of well safety,.but also recognizes that it must perform all regulated activities to a standard that satisfies the AOGCC. We look forward to continuing to work cooperatively with the AOGCC as we pursue our exploration and future development activities. If you have any questions or require additional information, please contact me at (907) 868-8070 or by cell at (907) 575-8914. Sincerely, 7GreZatear Petroleum Operating LLC Patrick S. Galvin Executive Vice President Great Bear Petroleum A New Direction for the Last Frontier 5 5 . it 505, nc h(1-, , c : 0 Phone: (907) 6 -8070, Fax. (907) 868-3887 FORMATION INTEGRITY TEST TRAINING PLAN August 28, 2015 1. Personnel Qualifications • The Great Bear drilling management team (i.e. Great Bear drilling manager, drilling superintendent, and drilling engineers) will receive formal well control training to a level equal to or above that required for the person -in -charge as specified in 20 AAC 25.527 (d). • Drill site managers (Company Man) will have received formal well control training to a level equal to that required for the person -in -charge as specified in 20 AAC 25.527 (d). • Contracted drilling company rig personnel, (toolpusher, driller or functional equivalent) will have received formal well control training as specified in 20 AAC 25.527 (d). • Prior to operations, the Great Bear drilling management team, the drill site manager, and the drilling contractor toolpusher and driller will jointly review the well plan and formation integrity test procedures. 2. Testing Design and Documentation • The Great Bear well plan and APD will include a step-by-step description of formation integrity test procedures. • The Great Bear well plan and APD will include a format for recording and interpreting results. This will be in the field in both hard copy and digital electronic workbook format. • After the rig is commissioned on -site, the drilling engineer and the drill site manager will inspect the rig and confirm that the installed equipment is functionally adequate for the execution of the formation integrity test as described in the well plan. FORMATION INTEGRI EST TRAINING PLAN August 28, 2015 Page 2of2 3. Formation Integrity Test Execution • Prior to conducting the formation integrity test, the drilling engineer, drill site manager, drilling contractor toolpusher and driller will review together the test procedure, equipment and documentation requirements. • The drill site manager will be the person -in -charge responsible for directing the test procedure. • The drill site manager will be present on the rig at all times during the test procedure. • The drilling engineer will monitor and confirm the execution of the test and the recording of the test data. • The drilling engineer will either be on -site or remotely monitoring rig activity via real time rig data transmission or telephone communication with the drill site manager. 4. Test Quality Control and Report Submittal • The drilling engineer and the drill site manager will each independently input the test data and evaluate the results using the format provided in the well plan. • The drilling engineer will confirm the test results with respect to their accuracy and agreement with the well design as stated in the APD. • The drill site manager and/or the drilling engineer will contact the drilling superintendent and report the test results. • The drilling superintendent will confirm the results and authorize their transmittal to the AOGCC field inspector. • If there is any question as to procedural execution or calculated formation integrity values, the drilling superintendent will contact the Great Bear drilling manager. • The Great Bear drilling manager will direct field staff as appropriate and/or contact the AOGCC engineering staff as required. I MIS CAECK-AAS A COLORED FACE OAITHITE STOCK AND AN ARTIFICIAL WATERMARK ON THE BACK. GREAT BEAR PETROLEUM OI TING LLC Wells Fargo 8 6 89-5 CHECK NO. 11137 601 W 5TH AVE STE 505 wellsergbcom 1252 ANCHORAGE, AK 99501-6305 OPERATING ACCOUNT CHECK NUMBER CHECK DATE PAY EXACTLY EXACTL 320f000dols00c �+ L 111$7 - Aug 26, 2015 _ ;20,040_00 _ ...J TWENTY THOUSAND DOLLARS AND NO CENTS VOID IF NOT PRESENTED FOR PAYMENT WITHIN 180 DAYS GREAT BEAR PETROLEUM OPERATINGfLC TO STATE OF ALASKA THE 550 W 7TH AVE, SUITE 1260 ORDER ANCHORAGE, AK 99501 OF-- 1180 L 113 ?111 1: 1 2 5 2000 5 7I: 29 1084048 311' RECEIVED t MAY 0 8 2015 p AOGCC Great Bear Petroleum A New Direction for the Last Frontier 601 W. 51';' Ave,, Suite 505, Anchorage, AK 99501. Phone: (07) 868-8070, Fax: (07) 868-3887 May 7, 2015 Ms. Cathy Foerster, Chair Alaska Oil and Gas Conservation Commission 333 W. 7th Ave. Anchorage, Alaska 99501 RE: Docket No. OTH-15-016 Alleged Inadequate LOT on surface casing shoe Well: Alkaid #1 (PTD 214-208) Chair Foerster, Great Bear Petroleum Operating LLC ("Great Bear") appreciates the opportunity to clarify and provide more information on the matter referenced above. Drilling oil wells in Alaska requires overcoming many challenges including harsh weather, a short winter exploration season, strained and unreliable supply routes, a limited rig market, and remote operations. It is important that exploration companies have open and transparent communication with AOGCC as we work together to ensure operations are conducted in a safe manner to minimize risks of human injury, environmental damage, or physical or economic waste. It is in that spirit that Great Bear provides the following information. Although Alkaid #1 represented only the third well drilled by Great Bear, the team Great Bear contracted to drill these wells, which includes long time, established Alaska companies Nabors Alaska Drilling, Inc. ("Nabors") and SolstenXP Inc. ("SolstenXP'% has decades of experience drilling hundreds of wells both in Alaska and all over the world. Great Bear's CEO and President, Ed Duncan, and Exploration Manager, Bret Chambers, have participated in hundreds of previous wells. Great Bear's drilling operations management contractor, SolstenXP, has managed numerous exploration wells in Alaska over the past decade, and the Drilling Manager for Alkaid #1, Stephen Lewis, has 30 years' experience drilling wells similar to Alkaid #1. Great Bear contracted Nabors to provide the rig and the crew. Nabors is the leading provider out of the two AOGCC May 7, 2015 Page 2 of 6 companies in Alaska available to provide rigs and crews. Great Bear's business model from the start has been to contract with experienced Arctic operators instead of growing organically from the lower 48. Just as drilling a well in Alaska is a team exercise, the compilation of this response is based on information from both Great Bear and SolstenXP. The process of reviewing the information necessary to respond to AOGCC proved valuable in identifying a few gaps in long established processes, and pointed to opportunities for improvement, which are identified below. As a structure for this response, Great Bear has broken out different statements contained in the AOGCC letter dated April 22, 2015 (received April 23) for separate consideration and response. 1. "The LOT value that Great Bear Petroleum Operating LLC (GBP) reported in its daily activity report was not validated by the original data supplied. The weeklx summary report as well as the daily drilling report submitted by Great Bear stated that the LOT value was 12 ppg equivalent mud weight (EMW). AOGCC analysis of the same data indicates a LOT of 11.0 ppg EMW. Additionally, it appears that the data was impacted by changing the pump rate in the middle of the LOT." The leak off test ("LOT') was conducted on the evening of March 9, 2015 by the Company Man on duty and the onsite Drilling Engineer. Pumping was initiated at 0.335 bpm and maintained for six and a half (6-1/2) minutes. The pumping rate was increased to 0.559 bpm and maintained for another five and one quarter (5-1/4) minutes. Pressures were read and manually recorded from the chart recorder gauge. Great Bear and SolstenXP agree that, upon closer review, the test data submitted on March 9, 2015 does not support a LOT value of 12.0 ppg. However, Great Bear and SolstenXP believe that an interpretation of 11.0 ppg is the most conservative possible conclusion. Great Bear and SolstenXP regret the error in reporting the LOT results, and we explain below the circumstances of the error and the steps being taken to ensure that any similar error does not happen in the future. However, for reasons expanded on in subsequent sections, we reject any contention that the deviation between the reported LOT values and the actual test results created an unsafe condition. The reported value of 12.0 ppg was based on a telephone communication of the results from the rig to the Drilling Manager in Anchorage. When the AOGCC May 7, 2015 Page 3 of 6 documentation from the test was subsequently sent to Anchorage, the error in interpretation by the rig personnel was not picked up. In addition, when the weekly report was put together, it was based solely on the daily reports, and no additional review of the LOT results was conducted. The pump rate was changed in the middle of the LOT. The rig personnel report that they changed the pump rate to speed up the test, as they felt they had set the pump rate too low at the outset of the LOT. They did not realize that changing the pump rate would impact the integrity of the test results. The significance of the change in the pump rate was not recognized until the issue was raised by AOGCC. Great Bear and SolstenXP agree that changing the pump rate in the middle of the LOT was improper procedure. Based on this experience, the following actions have been taken to ensure that similar errors are not repeated in future Great Bear wells: • Training refreshers in LOT procedures, calculation methods and report submittal requirements were conducted with all concerned field and office staff. • Process oversight was modified to include final review of test result interpretation by the Anchorage drilling staff prior to submittal to the AOGCC. • Future pre -operational staff training agenda will include LOT process review. • To the extent possible, pumps, chart recorders and pressure gauges utilized for LOT procedures will be appropriately rated for the volumes, pump rates and pressure ranges expected. 2. "Mud weights for the intermediate hole section were predicted to be up to 10.5 ppg. With only a 11 ppq EMW LOT there was virtually no kick tolerance." Great Bear and SolstenXP disagree with the contention that at any time the Alkaid #1 well was drilled with "virtually no kick tolerance." This contention is in error for a number of reasons separately expanded on below. First, the expected maximum mud weight at the time of drilling out of the shoe was not 10.5 ppg, but actually 9.8 ppg. The Permit to Drill reported a planned mud weight of 9.2 coming out of the surface casing shoe and increasing to 9.8 when entering the top of the Kuparuk formation. If drilled, it would increase from there to a maximum of 10.6 ppg at pre -drill planned TD of 11,800'. However, at the time of drilling out of the surface shoe, Great Bear had determined not to drill beyond the Kuparuk interval. Delays in drilling the top AOGCC May 7, 2015 Page 4 of 6 portion of Alkaid #1 meant that drilling time needed to be shortened at Alkaid #1 to try to preserve the opportunity to subsequently drill Talitha #2. SolstenXP was told during the drilling of the surface hole that the maximum depth would be approximately 9,600', but that if the target interval (8,100'to 8,400') looked good, Great Bear would call TD there to secure the borehole. Therefore, at the time of drilling out of the surface casing shoe, the maximum expected mud weight was 9.8 ppg. In actuality, the TD mud weight turned out to be 9.4 ppg. Second, AOGCC's April 22 letter appears to reach the conclusion of an insufficient kick tolerance based on the differential between the estimated maximum mud weight contained in the Permit to Drill and the attributed LOT value. The implication is that a differential of 0.5 ppg resulted in "virtually no kick tolerance." However, this methodology is not utilized by Great Bear and SolstenXP as we believe it fails to recognize the at -the -time knowledge of maximum expected mud weight and does not adequately account for other "as drilled" variables in well bore conditions. SolstenXP and other operators on the slope use a different method to calculate a value related to the maximum volume of gas kick that can safely be circulated out of the well during a well kill displacement without breaking down the weak point, commonly assumed to be the shoe of the previously set casing. This methodology is referred to as Volumetric or Bubble kick tolerance. This method has been in common use for decades and a sample is attached to this letter. It was this methodology that was used by the SolstenXP staff to determine that sufficient kick tolerance was in place throughout the drilling of Alkaid #1. Third, AOGCC's April 22 letter appears to not have been informed by the formation issues incorporated into the interpretation of the LOT results. The following statement is provided by Drilling Manager, Stephen Lewis: "The 12 1/4" surface hole was drilled to 3333' MD/TVD into what appeared to be a competent and continuous siltstone interval. 10 3/4" casing was set and cemented at 3321' MD/IVD. The casing was tested and subsequently drilled out to 3355'. Leak off test was conducted and yielded a lower than expected value, and per procedure on -site staff called me and reported the result. "I evaluated kick tolerance by the volumetric method and determined that it was appropriate to proceed. As LOT data quality is less than precise, I used a maximum and minimum value case and ran the calculation model with both 12 ppg LOT and 11 ppg LOT in order to confirm the ability to reach the next primary target interval at —7760' AOGCC May 7, 2015 Page 5 of 6 TVD. These calculations yielded values of 52.0 bbl at 12 ppg and 33.4 bbl at 11 ppg. These values are within normal operational limits and I elected to drill ahead. The LOT results were then submitted to AOGCC. "To further understand the LOT results, I paid particular attention to the MWD/LWD results just below the surface casing shoe. Logging while drilling indicated the presence of two coal layers immediately below the base of the original hole (subsequent a -line logging confirms these coals between 3335' and 3346' MD/TVD and 3355' and 3363' MD/lVD). These zones appeared to be the weak point in the well bore immediately below the shoe. "Continuously throughout the next 4600 feet of hole section, I monitored the Kick Tolerance using actual well data for mud weight and plan data for pore pressure. Calculated values remained acceptable." For the forgoing reasons, Great Bear and SolstenXP believe that an appropriate level of kick tolerance was maintained throughout the drilling of Alkaid #1. Also, Great Bear and SolstenXP dispute any contention that the LOT data was not fully evaluated prior to the decision to drill ahead. 3. "The expected LOT for the surface casing shoe was 13 ppg according to the drilling permit. There was no communication to the AOGCC re aq rding any anomalies in the LOT or concerns with drilling ahead." Great Bear and SolstenXP agree that the expected LOT for the surface casing was 13 ppg, and our procedures required the rig to alert the Drilling Manager if there was a significant deviation from the expected value. The Drilling Manager received the information regarding the LOT and evaluated its impact on the drilling program. Based on his analysis, no change in the well design or drilling plan was warranted. He did not identify this issue as one that required specific notification to AOGCC. During the drilling of a well, the Drilling Manager is constantly evaluating information that is coming from the rig. Much of this information will deviate from pre -drill expectations. It is a role that requires constant vigilance as to whether any of the information demonstrates a new or growing risk factor. Along the spectrum of risk tolerance is a point where a growing risk factor should be reported to AOGCC. The regulations do not provide when this threshold is reached, and it is incumbent on the operator to use proper judgment in making such a call. AOGCC May 7, 2015 Page 6 of 6 Great Bear demands complete compliance with all regulatory requirements. In addition, Great Bear encourages as much transparency with regulatory agencies as possible given the constraints of time and priority to focus on the work at hand. In this instance, Great Bear believes that we have complied with the regulatory requirements concerning reporting of the LOT results. However, we recognize that the considerations being weighed by the Drilling Manager at the time of the decision to drill ahead included facts that would not have been apparent to AOGCC, specifically the fact that the decision to call TD much shallower had already been made by Great Bear. For this reason, Great Bear has taken the following action to ensure that AOGCC is kept better informed during the drilling of any future Great Bear well: Great Bear will require our drilling management team to ensure that information coming from the rig and the decisions being made while drilling are tracked with a focus on determining whether AOGCC needs to be alerted as to a current or emerging drilling condition. Great Bear hopes that the information contained in this response is sufficient to satisfy AOGCC that the Alkaid #1 well was drilled with proper consideration of well safety. If you have any questions or require additional information, please contact me at (907) 868-8070 or by cell at (907) 575-8914. Sincerely, Great Bear Petroleum Operating LLC Patrick S. Galvin Vice President -External Affairs & Deputy General Counsel THE STATE 01ALASK-A GOVERNOR BILL WALKER April 22, 2015 CERTIFIED MAIL — RETURN RECEIPT REQUESTED 7012 3050 0001 4812 7089 Mr. Patrick S. Galvin VP External Affairs Great Bear Petroleum Operating, LLC 601 West 51" Avenue, Suite 505 Anchorage, AK 99501 Re: Docket No. OTH-15-016 Inadequate LOT on surface casing shoe Well: Alkaid #1 (PTD 214-208) Dear Mr. Galvin: Alaska Coil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Main: 907.279.1433 Fax: 907.276.7542 www.aogcc.alaska.gov On April 14, 2015 during Alaska Oil and Gas Conservation (AOGCC) review of Leak Off Test (LOT) data in a sundry application for annular disposal on Alkaid # 1 anomalies were seen in the original March 9, 2015 LOT test done on the 10 1/4" surface casing shoe. The LOT value that Great Bear Petroleum Operating, LLC (GBP) reported in its daily activity report was not validated by the original data supplied. The weekly summary report as well as the daily drilling report submitted by Great Bear stated that the LOT value was 12 ppg equivalent mud weight (EMW). AOGCC analysis of the same data indicates a LOT of 11.0 ppg EMW. Additionally, it appears that the data was impacted by changing the pump rate in the middle of the LOT. Mud weights for the intermediate hole section were predicted to be up to 10.5 ppg. With only a 11 ppg EMW LOT there was virtually no kick tolerance. The expected LOT for the surface casing shoe was 13 ppg according to the drilling permit. There was no communication to the AOGCC regarding any anomalies in the LOT or concerns with drilling ahead. Within 14 days of receipt of this letter, you are requested to provide the AOGCC with an explanation of how this event happened and what has been or will be done in the future to prevent its recurrence. Failure to comply with this request will be an additional violation per 20 AAC 25.300. Docket No. OTH-15-016 April 22, 2015 Page 2 of 2 Drilling ahead in any well without fully analyzing LOT data will not be tolerated. The AOGCC reserves the right to pursue additional enforcement action in connection with Alkaid #1. Questions regarding this letter should be directed to Guy Schwartz at (907) 793-1226. cc: Jim Regg AOGCC Inspectors Sincerely, �& /�Z4� Cathy P oerster Chair, Commissioner TION AND APPEAL As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10-days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day that does not fall on aweekend or state holiday. Postal (DomesticCERTIFIED MAILT. RECEIPT CID C3 ru r-1 Postage $ Certified Fee r 9 Postmark C3 Return Receipt Fee Here 0 (Endorsement Required) Restricted Delivery Fee C3 (Endorsement Required) Ll C3 Total Postage & Fees m Mr. Patrick S. Galvin rU Sent To VP - External Affairs r-q .;'---"---'-- trtC3 See,AptNo.Great Bear Petroleum Operating, LLC N or PO Box No. Clry State, zia+a--""------ 601 W. 5th Ave., Ste. 505 Anchorage, AK 99501 WEEMEWL ■ Complete items 1, 2, and 3. Also complete A. Signature item 4 if Restricted Delivery is desired. ❑Agent X ■ Print your name and address on the reverse �C Addressee so that we can return the card to you. 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Article Number 7012 3050 0001 4812 7089 (Transfer from service label) PS Form 3811, July 2013 Domestic Return Receipt Schwartz, Guy L (DOA) From: Steve Lewis <steve.lewis@solstenxp.com> Sent: Wednesday, April 15, 2015 5:21 PM To: Schwartz, Guy L (DOA) Subject: Alkaid #1 Surface casing LOT Attachments: 150310 Alkaidl_Morning_Drilling_Report.pdf, Alkaid LOT.pdf, LOT chart.pdf Guy, Per your request attached are the daily report, charted recorder pressure and a copy of the data plot. These later two were submitted to Lou Grimaldi on March 9. As best I can make out by interpolating the time vs pressure they started at maybe a third of a barrel per minute for the first 2 barrels then went up to one BPM for the last 3. Not exactly what it says in the report but that is what it looks like. Let me know if you need to discuss this further. Stephen K. Lewis Drilling Manager i„ 406 W. Fireweed Lane, Suite 101 Anchorage, Alaska 99503 Main 907-279-6900 Direct 907-264-6115 Cell 907-240-9412